Some Coalition backbenchers are backing Labor's demand to curb the tax break in order to control the growth of house prices in capital cities.

But speaking in London, Mr Morrison said the policy would not work and again reinforced the Government's position that changing negative gearing would make it harder to save for a house.

"The changes that Labor are proposing to negative gearing drive up rents," he said.

"Now if you're renting a house you're also trying to buy a house, so you don't make it easier to buy houses by jacking up the rents."

The Member for Canning, Andrew Hastie, was quoted in The Australian yesterday as saying housing affordability was a "moral issue" and that "everything should be on the table".

Another Liberal MP, John Alexander, told the newspaper there needed to be a debate on the issue, labelling negative gearing an example of politics "[getting] in the way of developing better policy".

Labor's stance on negative gearing 'jingoistic'

Mr Morrison's remarks come almost one week after Sydney's housing affordability crisis was highlighted in an international survey, which ranked the Harbour City's house prices behind only Hong Kong among other world cities including London and New York.

The Labor Party has advocated for negative gearing reform, however Mr Morrison described their debate on the issue as a "cruel hoax".

"I think what Labor has done on negative gearing has become very jingoistic when it comes to housing affordability policy," he said.

"They believe in silver bullets. It is foolish and reckless and doesn't help anybody.

"The way that Bill Shorten and, indeed, Chris Bowen and the others, have engaged in address Australian's frustration at the moment with the politics of populism and denial is a cruel hoax."

Attracting private investment into social housing

Meanwhile, the Federal Government is investigating different funding models to improve the supply of social and low-cost housing.

Mr Morrison has released a discussion paper on social impact investments which provide a financial return to investors in exchange for saving the Government money.

The Treasurer said state and federal Governments spend a combined $10 billion on housing each year but demand still outstrips supply.

He said the existing system is not working and the Government is keen to see whether private sector investment could help increase housing stocks.

"Here [in the UK] you've got institutional investors, you've even got Australian superannuation funds investing in affordable housing in the UK, we need to ensure we have an environment where they'll do the same thing in Australia," he said.